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The Honolulu Advertiser

Posted at 5:28 p.m., Tuesday, January 7, 2003

Economists stick with state revenue forecast

By Bruce Dunford
Associated Press

The state's Council on Revenues voted today to stick to their earlier forecast that said state general fund tax revenues will grow by 6.1 percent this fiscal year over last year and will continue a growth rate ranging about 5 and 6 percent over the next several years.

That should be welcome news for Gov. Linda Lingle and state lawmakers as they put together the two-year, $15 billion state budget in the 2003 legislative session that begins Jan. 15.

The panel of economists had wrestled with lowering the forecast, which would have meant less income to support the budget at a time the state already faces a tight fiscal situation.

Tax Foundation of Hawaii President Lowell Kalapa, however, said he feels the forecast is "overly optimistic."

"It's not taking into consideration some of the events that are sitting out there that are so obvious to us such as the situation Iraq and what's happening nationally as far as domestic policy is concerned," said Kalapa, a former member of the council.

Kalapa said there likely is already an economic impact nationally because of a potential conflict in the Middle East with reservists being called up and troops being mobilized.

"... people who otherwise might have traveled here are going to have a little bit more reservations about taking a leisurely vacation to Hawai'i because of what's happening in the Middle East," he said.

It's a mood prevalent on the mainland that's not being felt in Hawai'i because of the islands' distance, Kalapa said.

Council Chairman Michael Sklarz defended the panel's forecast.

For one thing, revenues thus far in the fiscal year seem to be on track with the council's earlier forecast made Sept. 6, he said.

"The other is just what we know about the economy," Sklarz said. "Some of the things that seem to be positive are record real estate sales activity, very decent retail sales and decent tourism numbers and seemingly a fair degree of confidence in the overall economy."

There's always a caveat in the forecast about some unforeseen event such as a strike, hurricane or the potential for a war, he said. "But we always have the opportunity to reconvene and revisit the numbers if such an event does occur."

The council is scheduled to meet again March 13 to consider revisiting the forecast.

Lingle told a meeting of the Hawaii Publisher's Association today that "we have gotten a great handle on the budget. It's going to be an exciting document, one not just a financial plan but a management tool for our departments.

"It's going to allow the public to have a clear understanding of what the priorities are in our administration, where their money's going to be spent," she said.

Lingle's administration is working from a budget drafted by former Gov. Ben Cayetano.

While she's confident the economy will improve "down the road, the first couple of years I think are going to be a challenge for us from the government budgeting point of view," Lingle said.

The governor said she disagrees with the idea that spending cuts over the past several years have taken all the fat out of the state budget.

"There are lots of places in the government to trim and there are some pieces to actually cut," Lingle said.

There are many state special and revolving funds that contain millions of dollars and unless they can be shown to be meeting the purpose for which they are created, the money should go to other uses, she said.

The exception, she said, is the Hawai'i Hurricane Relief Fund, which she pledged during her campaign to maintain, despite former Gov. Ben Cayetano's use of $175 million from the fund to balance his version of the state budget.